Valuing Ecosystem Services as Productive Inputs: Discussion

comment

How do European monetary and fiscal authorities behave ?

European monetary and fiscal authoritie

Taylor Rules and the Term Structure

The expectations model of the term structure has been subjected to numerous empirical tests and almost invariably rejected, with the failure generally attributed to systematic expectations errors or to shifts in risk premia.Rules for monetary policy designed along the lines of Taylor (1993) specify that the central bank adjusts short-term yields in response to deviations of inflation and output gaps from target level. Such rules give a good empirical account of the behavior of the short-term interest rate.Combining the Taylor rule and expectations theory, it is possible to generate ---along lines pioneered by Campbell and Shiller (1987) --- a series of theoretical long-term interest rates. When such theoretical rates are calculated for the U.S. over 1980 to 2004, considerable support for the expectations theory emerges

Comments on ‘‘Fiscal and monetary policy interactions: Empirical evidence on optimal policy using a structural new-Keynesian model’’

Comments on ‘‘Fiscal and monetary policy interactions: Empirical evidence on optimal policy using a structural new-Keynesian model’

Improving Fiscal Policy in the EU: The Case for Independent Forecasts: Discussion

Improving Fiscal Policy in the EU: The Case for Independent Forecasts: Discussio

Taxation and Optimization of Oil Exploration and Production: The U.K. Continental Shelf

Taxation and Optimization of Oil Exploration and Production: The U.K. Continental Shel

Demographics and the secular stagnation hypothesis in Europe

Demographic trends in Europe do not support empirically the secular stagnation hypothesis. Our evidence shows that the age structure of population generates less long-term growth but positive real rates. Policies for growth become very important. We assess the relevance of the demographic structure for the choice between macro adjustements and structural reforms. We show that middle aged and elderly individuals have a more negative view of reforms, competitiveness and globalization than young. Our results suggest that older countries -- in terms of share of elderly people -- should lean more towards macroeconomic adjustments, whereas younger nations will be more supportive of structural reforms

Contagion in the EMU: the role of Eurobonds with OMTs

We find strong evidence of country interdependence in the pricing of default risk, which suggests that a crisis can easily propagate from countries with weak fiscal fundamentals to other fiscally sounder member States. Interest rate interdependence differs between countries with high interest rates -high yielders- and countries with low interest rates -low yielders-. The former countries are linked through global spreads; i.e. they are exposed to the interest rate spreads (over Germany) of other troubled countries to a degree which increases with fiscal proximity. Low yielders with sounder fiscal fundamentals are partially immune from the high interest rates of fiscally weak member States but are still exposed to the risk of a euro break-up that is priced in Quanto CDS. This ‘euro risk’ factor is a main driver of the interest rate spreads of low yielders until August 2012. More importantly, our case study of Italy shows that the impact of the global spread variable is dominated by changes in market sentiment, a sign that the Italian 2011-2012 crisis had the characteristics of a debt run more than a crisis of fundamentals. This evidence suggests that Eurobonds would be justified as an instrument for crisis prevention in the absence of a ‘lender of last resort’. With the announcement of OMTs, the ECB seems to have taken such role upon itself, mainly as a response to the risk of a euro break-up. We show that OMTs led to a significant fall in the impact effect of the global spread variable in the Italian case. The ECB’s ability to buy member States’ bonds reduces the risk of a self-fulfilling debt run but also deprives Eurobonds of their role in crisis prevention. Proposals to introduce Eurobonds to finance investment projects and expenditures related to the security and refugee crisis appear more realistic

Parameter Instability, Model Uncertainty and the Choice of Monetary Policy

Parameter Instability, Model Uncertainty and the Choice of Monetary Polic

Uncertainty on monetary policy and the expectations model of the term structure of interes rates

Uncertainty on monetary policy and the expectations model of the term structure of interes rate